United Kingdom inflation jumps again as petrol pushes prices higher

United Kingdom inflation jumps again as petrol pushes prices higher”

Ben Brettell, senior economist at Hargreaves Lansdown, said it looked likely inflation would fall back in the coming months, as the effect of Brexit-induced sterling weakness fell out of the year-on-year calculation.

"Wage growth is modest - wages are rising at around 2 per cent year-on-year depending on the measure you choose".

Sterling jumped more than half a percent against both the dollar and euro on Tuesday after United Kingdom inflation rose to its highest in five years, adding to the case for the Bank of England to do more to support the pound. The prices charged by companies at the factory gate rose in August at an annual rate of 3.4%, while the cost of firms' raw materials rose 7.6%, fueled by increasing crude oil prices.

The yield on the benchmark 10-year gilts, jumped 3 basis points to 1.07 percent, the super-long 30-year bond yields climbed 2-1/2 basis points to 1.72 percent and the yield on the short-term 2-year traded almost 1-1/2 basis points higher at 0.23 percent by 09:15 GMT. Clothing and footwear rose 4.6 percent year-on-year, hitting their highest level since records began, partly because of rising import costs for retailers in the wake of Brexit. It also gained against the euro, following a strong start to the day against its peers ahead of the release of figures. The month of August registered 2.9% inflation on the year up from the previous 2.6% reading and bypassing the 2.8% forecast. "However it still remains to be seen if the dovish majority at the BoE can be persuaded that the latest rise in inflation necessitates a more hawkish policy".

"Indeed it is possible that 2.9% will be the highest we see in the current cycle".

The Bank is predicting CPI to peak at around 3% in October, with Governor Mark Carney warning last month that the pressure on families would continue for the next few quarters.

CPIH rose to 2.9% in August from 2.6% in July and against expectations of 2.8%, while Core CPI rose to 2.7% from 2.4% beating expectations of 2.5%.

The pickup in inflation, from a 2.6% annual rate in July, was larger than economists polled by The Wall Street Journal were expecting.

Calum Bennie, savings expert at Scottish Friendly, said: "Family finances are going to be stretched for some time to come and the increase in inflation just exacerbates this".

"However, hopefully this will not be at the expense of putting money aside for their financial future".

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